All fiat currencies eventually fail, the only money that will be left standing are gold & silver (precious metals). Those who do not fully understand and prepare for the coming collapse cannot reasonably expect to survive (it)

Wall Street banks have been saved from bankruptcy by governments that are now going bankrupt themselves; but the banks are not returning the favor. Instead, they are engaged in a class war, insisting that the squeezed middle class be even further squeezed to balance over-stressed government budgets. All the perks are going to Wall Street, while Main Street slips into debt slavery. Wall Street needs to be made to pay its fair share, but how?

The financial reform bill agreed to on June 25 may have carved out some protections for consumers, but for Goldman Sachs and the derivatives lobby, the bill was a clear win, leaving the Wall Street gambling business intact. In a June 25 Newsweek article titled “Financial Reform Makes Biggest Banks Stronger,” Michael Hirsh wrote that the bill “effectively anoints the existing banking elite. The bill makes it likely that they will be the future giants of banking as well.”

The federal government and Federal Reserve have advanced literally trillions of dollars to save the big Wall Street players, to the point where the government’s own credit rating is in jeopardy; but Wall Street has not had to pay for the cleanup. Instead, the states and the citizens have been left to pick up the tab. On June 17, Time featured an article by David von Drehle titled “Inside the Dire Financial State of the States,” reporting that most states are now facing persistent budget shortfalls of a sort not seen since the 1930s. Unlike the Wall Street banks, which can borrow at the phenomenally low fed funds rate of .2% and plow that money back into speculation, states don’t have ready access to credit lines. They have to borrow through bond issues, and many states are so close to bankruptcy that their municipal bond ratings are collapsing. Worse, states are not legally allowed to default. Unlike the federal government, which can go into debt indefinitely, states must balance their budgets; and they cannot issue their own currencies. That puts them in the same position as Greece and other debt-strapped European Union countries, which are forbidden under EU rules either to issue their own currencies or to borrow from their own central banks.

States, of course, don’t even have their own state-owned banks, with one exception --North Dakota . North Dakota is also the only state now sporting a budget surplus, and it has the lowest unemployment and mortgage delinquency rates in the country. As von Drehle observes, “It’s a swell time to be North Dakota .”

But most states are dealing with serious, chronic defaults, putting them in the same debt trap as Greece : they are being forced to lay off workers, sell public assets, and look for ways to squeeze more taxes out of an already over-taxed populace. And their situation is slated to get worse, since the federal government’s stimulus package will soon be cut, along with assistance to the states.

The federal government is not only leaving the states high and dry but is threatening to impose even more taxes on their beleaguered citizens. Paul Volcker, former Federal Reserve Chairman and current White House economic adviser, said in April that Congress needs to consider a Value Added Tax (VAT) – a tax on various stages of production of consumer goods. A VAT of 17.5% is now imposed in Britain , and 20% is being proposed; while some EU countries already have a VAT as high as 25. In Europe, at least the citizens get something for their money, including federally-funded health care; but that is not likely to happen in the U.S., where even a “public option” in health care is no longer on the agenda. The VAT hits the lower and middle classes particularly hard, since they spend most of their incomes on consumables. The rich, on the other hand, put much of their money into speculative trades, and those sales are not currently taxed.

Business Cycle or Class War?

Ismael Hossein-Zadehi, who teaches economics at Drake University in Iowa , calls the whole economic crisis a class war. What is being billed as public debt began as the private debt of financial speculators who offloaded it onto the public. The governments that bailed out these insolvent speculators then became insolvent themselves; but the bailed-out banks, rather than lending a helping hand in return, have demanded their pound of flesh, with payment in full. The perpetrators are blaming the victims and insisting on “fiscal responsibility.” Wall Street bankers are dictating the terms of repayment for debts they themselves incurred.

“Fiscal responsibility” means cutting spending, something that is inherently deflationary during a recession, as seen in the disastrous Depression-era policies of President Herbert Hoover. Not that it was solely a Republican error. In 1937, President Franklin Roosevelt also cut public spending, tipping the economy back into recession. Spending cuts cause tax revenues to shrink, which results in more spending cuts. Contrary to what we have been told, national governments are not like households. They do not have to balance their budgets and “live within their means,” because they have the means to increase the money supply. They not only have the means, but they must engage in public spending when the private economy is shrinking, in order to keep the wheels of the economy turning. Virtually all money now originates as bank-created credit or debt; and today the money supply has been shrinking at a rate not seen since the 1930s, because the banking crisis has made credit harder and harder to get.

Instead of “reflating” the collapsed economy, however, national governments are insisting on “fiscal responsibility;” and the responsibility is all being put on the states and the laboring and producing classes. The financial speculators who caused the debacle are largely getting off scot free. They not only pay no tax on the purchase and sale of their “financial products,” but they pay very little in the way of income taxes. Goldman Sachs paid an effective income tax rate of only 1% in 2008. Prof. Hossein-Zadehi writes:

“It is increasingly becoming clear that the working majority around the world face a common enemy: an unproductive financial oligarchy that, like parasites, sucks the economic blood out of the working people, simply by trading and/or betting on claims of ownership. . . . The real question is when the working people and other victims of the unjust debt burden will grasp the gravity of this challenge, and rise to the critical task of breaking free from the shackles of debt and depression.”

Working people don’t rise to the task because they have been propagandized into believing that “fiscal austerity” is something that needs to be done in order to save their children from an even worse fate. What actually needs to happen in a deflationary collapse is to spend more money into the system, not pull it back out by paying off the federal debt; but the money needs to go into the real economy – into factories, farms, businesses, housing, transportation, sustainable energy systems, health care, education. Instead, the stimulus money has been hijacked, diverted into cleaning up the toxic balance sheets of the financial gamblers who propelled the economy into its perilous dive.

Evening Up the Score

While Congress caters to the banks, the states have been left to fend for themselves. Where is the money to come from to pull off the impossible feat of balancing their budgets? Bleeding a VAT tax out of an already-anemic working class is more likely to kill the patient than to alleviate the disease. “Unlike EU countries, where the VAT is the largest single source of tax revenue,” notes Professor Randall G. Holcombe in a recent study, “the states of the United States already tax the VAT tax base with their sales taxes.” This doubling down on the same base would not only reduce the amount of money states are able to raise, but it would seriously hinder VAT’s role as a money generator. By 2030, says Prof. Holcombe, this effect would have offset any increase in government revenue from the VAT.

A more viable and more equitable solution would be to tap into the only major market left on the planet that is not now subject to a sales tax – the “financial products” that are the stock in trade of the robust financial sector itself. A financial transaction tax on speculative trading is sometimes called a “Tobin tax,” after the man who first proposed it, Nobel laureate economist James Tobin. The revenue potential of a Tobin tax is huge. The Bank for International Settlements reported in 2008 that total annual derivatives trades were $1.14 quadrillion (a quadrillion is a thousand trillion). That figure was probably low, since over-the-counter trades are unreported and their magnitude is unknown. A mere 1% tax on $1 quadrillion in trades would generate $10 trillion annually in public funds. That is only for derivatives. There are also stocks, bonds and other financial trades to throw in the mix; and more than half of this trading occurs in the United States .

A Tobin tax would not generate these huge sums year after year, because it would largely kill the computerized high-frequency program trades that now compose 70% of stock market purchases. But that is a worthy end in itself. The sudden, thousand-point drop in the Dow Industrial Average on May 6 showed the world how vulnerable the stock market is to manipulation by these sophisticated market gamblers. The whole high-frequency trading business needs to be stopped, in order to protect legitimate investors using the stock market for the purposes for which it was designed: to raise capital for businesses. As Mark Cuban observed in a May 9 article titled “What Business Is Wall Street In?”:

“Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. . . . My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it’s through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won’t come from traders trying to hack the financial system for a few pennies per trade.”

Besides protecting legitimate savers and investors by exempting stock held five years or more, they could be exempted from a Tobin tax on total stock purchases of under $1 million per year. That would make the tax literally a millionaire’s tax -- and a small one at that, at only 1% per trade.

At the G20 summit in Toronto last weekend, a financial transaction tax was discussed and supported by France and Germany but was opposed by the U.S. and Canada , although nothing binding was resolved. However, the states do not have to wait for the federal government or the G20 to act. They could levy a Tobin tax themselves. Objection might be made that the Wall Street speculators would take their revenues and go elsewhere, but big banks and brokerages have branches in every major city in every state. They are hardly likely to pack up their tents and leave lucrative centers of business. Nor can it be argued that we should cater to the pirates who are looting our stock markets because they are paying us a nice bribe, because they aren’t even paying a bribe. Financial trades do not currently generate tax revenues.

Two Green Party candidates for governor, Laura Wells in California and Rich Whitney in Illinois, have included a state-imposed Tobin tax in their platforms. Both are also campaigning for state-owned banks in their states, on the model of the Bank of North Dakota. People around the world look to the United States for boldness and innovation, and California and Illinois are two of the hardest hit states in the nation. If those states manage to turn their economies around, they could establish a model for economic sovereignty globally.

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles . In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are www.webofdebt.com, www.ellenbrown.com, and www.public-banking.com.

Ellen Brown is a frequent contributor to Global Research. Global Research Articles by Ellen Brown

No comments:

Post a Comment

Toilet Paper Money

Toilet Paper Money

All Fiat Currencies Eventually Fail

For Gods Sake Trevor Always You With That Conspiracy Stuff

I'm Telling You - The Man And The Dog Are Definitely Working Together

Greenspan's Ominous Shift

“Fiat money has no place to go but gold. If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”

The US Dollar since 1913

The US Dollar since 1913 & Gold

The Great Credit Contraction

"The world has gone from the greatest synchronized global economic boom in history to the first synchronized global bust since the Great Depression. How we got here is not a cautionary tale of free markets gone wild. Rather, it's the story of what can happen when governments ignore market signals and central bankers believe in endless booms." Investor Marc Faber

Ben Bernake

"Your" New $100 Federal Reserve Note

John Adams

"There are two ways to conquer and enslave a country. One is by the sword. The other is by debt." – John Adams

Charles A. Lindbergh - In 1913, he wrote Banking, Currency, and the Money Trust

"This Act establishes the most gigantic trust on earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized. The people may not know it immediately, but the day of reckoning is only a few years removed. The trusts will soon realize that they have gone too far even for their own good. The people must make a declaration of independence to relieve themselves from the Monetary Power. This they will be able to do by taking control of Congress. Wall Streeters could not cheat us if you Senators and Representatives did not make a humbug of Congress... The greatest crime of Congress is its currency system. The worst legislative crime of the ages is perpetrated by this banking bill. The caucus and the party bosses have again operated and prevented the people from getting the benefit of their own government." - In Reference to the Federal Reserve Act 1913

Sir Alan Greenspan

"Gold is the ultimate form of payment in the world." - Sir Alan Greenspan 2008

CNBC's Rick Santelli

"I can't remember the exact quote but when I used to trade and Mr. Volcker was Fed chairman, he said something like 'gold is my enemy, I'm always watching what gold is doing', we need to think why he made a statement like that. If you're a central banker or one of the congressmen or senators, watch what gold is doing because this is a no-confidence vote in fiscal and dollar policy."

Albert Einstein quote about The Illuminati

"The ruling class has the schools and press under its thumb. This enables it to sway the emotions of the masses"

American Comedian George Carlin

"Forget The Politicians. The Politicians are put there to give you the idea that you have freedom of choice… you don’t. You have no choice. You have owners. They own you!" – George Carlin

JP Morgan

"Gold is money, period."

Woodrow Wilson, after signing the Federal Reserve into existence

"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men ... [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men." - Woodrow Wilson, after signing the Federal Reserve into existence

George Bernard Shaw

"You have to choose (as a voter) between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."

The Strong Zimbabwe Dollar Policy

Sir Alan Greenspan quote from 1966 paper Gold & Economic Freedom

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

John Adams in a Letter to Thomas Jefferson

"All of the perplexities, confusion, and distress in America arises, not from the defects of the Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation." - John Adams

The United States Constitution

"No state shall emit bills of credit, make any thing but gold and silver coin a tender in payment of debts, coin money---." - Article One, Section Ten, US Constitution

The Honorable Ron Paul

"When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans." - Ron Paul

Henry Ford

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford

The Honorable Louis Thomas McFadden

"The Federal Reserve (Banks) are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this Nation is run by the International Bankers." - Rep Louis T. McFadden Speech denouncing the Federal Reserve System 1932

Fredrick August von Hayek

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people." - Hayek

John Maynard Keynes

"If, however, a government refrains from regulations and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer." - Keynes The Economic Consequences of the Peace page 240

The Honorable Ron Paul

"Of course I've already taken a very modest position on the monetary system, I do take the position that we should just end the Fed." - Ron Paul

Karl Marx

“Although gold and silver are not by nature money, money is by nature gold and silver.” – Karl Marx

Rep. Louis T. McFadden

"The Federal Reserve Board and the Federal Reserve banks owe the United States Government an immense sum of money. We ought to find out the exact amount of the people's claim. We should know the amount of the indebtedness of the Federal Reserve Board and the Federal Reserve banks to the people and we should investigate this treacherous and disloyal conduct of the Federal Reserve Board and the Federal Reserve banks." Louis T. McFadden denoucing the Federal Reserve before Congress 1932

Hitler was against freedom & against gold

"Gold is not neccesary. I have no interest in gold. We will build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That's the bastion of money." - Hitler

James Madison

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."

Thomas Jefferson

"I believe that banking institutions are more dangerous to our liberties than standing armies... if the American people ever allow private banks to control the issue of currency...the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent that their fathers conquered." - Thomas Jefferson

Baron Nathan Mayer Rothschild

"I care not what puppet is placed on the throne of England to rule the Empire, ...The man that controls Britain's money supply controls the British Empire. And I control the money supply."

Mayer Amschel Rothschild

“Give me control of a nation's money and I care not who makes the laws"